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It hasn't been always true, historically, that for-profit companies seek only to enrich their shareholders at all cost. https://www.boston.com/news/policy/2018

It hasn't been always true, historically, that for-profit companies seek only to enrich their shareholders at all cost. https://www.boston.com/news/policy/2018/08/16/elizabeth-warren-capitalism-bill https://www.boston.com/news/policy/2018/08/16/elizabeth-warr... "Warren attributes those problems to a shift, which she says dates back to the 1980s, in the obligations of corporations — from balancing responsibilities to all their stakeholders — including both employees and stock owners — to prioritizing their financial return to shareholders only." (That's not exactly responsive to your point on maximizing profit, but the body of work on this topic shows that when companies care about long-term return, and about employees and other stakeholders, they aren't solely focused on maximizing short-term profit over all else.)

beaconstudios 8y ago
or in other words, we can thank the stock market and pressure on public companies to focus on quarterly growth at all costs over long-term sustainability and a balanced approach.
- WillPostForFood 8y ago
  Philadelphia Stock Exchange was founded in 1790, NYSE in 1792. If something changed in the 1980s, it wasn’t the stock market.
  - nostrademons 8y ago
    The doctrine of what the purpose of business is changed in the 1980s. During the post-WW2 era the prevailing view was that the purpose of business was to "create a customer", and as a result, corporations existed primarily for consumer benefit. Read Drucker for elaboration on this, and it's also still assumed in many economics textbooks of that period. Starting in 1970, Milton Friedman argued that the sole purpose of a corporation was to increase shareholder value, and all of its other activities - providing jobs, fighting pollution, enhancing social justice, even serving customers - were subservient to that, to be engaged in only if they also helped profits. It took a while for this view to catch on, but following Reagan's election, it gained a lot of popularity in political & legal circles, and was firmly entrenched among business leaders by the mid-80s. The problem is that we've since discovered a number of ways that corporations can enhance shareholder value (as measured by stock price) without actually benefitting customers, and most of them involve strip-mining value built up over the long term at the expense of the future. And so a significant fraction of the population is just engaged in financial games while they get busy firing everyone who does actual work.
    - jjeaff 8y ago
      I don't think anyone "came around" to that sort of thinking. And Milton Freedman was not prescribing a strategy as much as describing a winning strategy. A strategy that has slowly taken over and beat out those organizations that either don't espouse it or have failed to adopt it.
    - gaius 8y ago
      without actually benefitting customers, and most of them involve strip-mining value built up over the long term at the expense of the future I think of this as the conversion of social capital into financial. The monetisation of things that used to be personal relationships, such as becoming intermediaries what used to be direct interaction.
    - WillPostForFood 8y ago
      Yes, so something changed, and it wasn't the stock market.
scarface74 8y ago
It’s not about short term vs long term profit. Even when a company is far sighted enough to care about long term profit, every step they take in the short term is in furtherance of that goal.
notyourday 8y ago
Company is only bound to its owners i.e. shareholders. Employees of the companies have only one way of pushing their agenda: "Either do what we want, or we quit". Companies either are OK with losing those employees and replacing them with others or they change their course to accommodate their employees. If those accommodations piss off the shareholders then the company gets to broker some sort of the compromise or its officers and directors get fired.

beaconstudios 8y ago

or in other words, we can thank the stock market and pressure on public companies to focus on quarterly growth at all costs over long-term sustainability and a balanced approach.

WillPostForFood 8y ago
Philadelphia Stock Exchange was founded in 1790, NYSE in 1792. If something changed in the 1980s, it wasn’t the stock market.
- nostrademons 8y ago
  The doctrine of what the purpose of business is changed in the 1980s. During the post-WW2 era the prevailing view was that the purpose of business was to "create a customer", and as a result, corporations existed primarily for consumer benefit. Read Drucker for elaboration on this, and it's also still assumed in many economics textbooks of that period. Starting in 1970, Milton Friedman argued that the sole purpose of a corporation was to increase shareholder value, and all of its other activities - providing jobs, fighting pollution, enhancing social justice, even serving customers - were subservient to that, to be engaged in only if they also helped profits. It took a while for this view to catch on, but following Reagan's election, it gained a lot of popularity in political & legal circles, and was firmly entrenched among business leaders by the mid-80s. The problem is that we've since discovered a number of ways that corporations can enhance shareholder value (as measured by stock price) without actually benefitting customers, and most of them involve strip-mining value built up over the long term at the expense of the future. And so a significant fraction of the population is just engaged in financial games while they get busy firing everyone who does actual work.
  - jjeaff 8y ago
    I don't think anyone "came around" to that sort of thinking. And Milton Freedman was not prescribing a strategy as much as describing a winning strategy. A strategy that has slowly taken over and beat out those organizations that either don't espouse it or have failed to adopt it.
  - gaius 8y ago
    without actually benefitting customers, and most of them involve strip-mining value built up over the long term at the expense of the future I think of this as the conversion of social capital into financial. The monetisation of things that used to be personal relationships, such as becoming intermediaries what used to be direct interaction.
  - WillPostForFood 8y ago
    Yes, so something changed, and it wasn't the stock market.

scarface74 8y ago

It’s not about short term vs long term profit. Even when a company is far sighted enough to care about long term profit, every step they take in the short term is in furtherance of that goal.

notyourday 8y ago

Company is only bound to its owners i.e. shareholders. Employees of the companies have only one way of pushing their agenda: "Either do what we want, or we quit". Companies either are OK with losing those employees and replacing them with others or they change their course to accommodate their employees. If those accommodations piss off the shareholders then the company gets to broker some sort of the compromise or its officers and directors get fired.